diff --git a/pep-0484.txt b/pep-0484.txt
index 437703c2c09..4b46b083c24 100644
--- a/pep-0484.txt
+++ b/pep-0484.txt
@@ -108,8 +108,8 @@ comment should be treated as having no annotations.
 It is recommended but not required that checked functions have
 annotations for all arguments and the return type.  For a checked
 function, the default annotation for arguments and for the return type
-is ``Any``.  An exception is that the first argument of instance and
-class methods does not need to be annotated; it is assumed to have the
+is ``Any``.  An exception is the first argument of instance and
+class methods. If it is not annotated, then it is assumed to have the
 type of the containing class for instance methods, and a type object
 type corresponding to the containing class object for class methods.
 For example, in class ``A`` the first argument of an instance method
@@ -1120,6 +1120,43 @@ subtype of ``Type[Base]``::
       ...
 
 
+Annotating instance and class methods
+-------------------------------------
+
+In most cases the first argument of class and instance methods
+does not need to be annotated, and it is assumed to have the
+type of the containing class for instance methods, and a type object
+type corresponding to the containing class object for class methods.
+In addition, the first argument in an instance method can be annotated
+with a type variable. In this case the return type may use the same
+type variable, thus making that method a generic function. For example::
+
+  T = TypeVar('T', bound='Copyable')
+  class Copyable:
+      def copy(self: T) -> T:
+          # return a copy of self
+
+  class C(Copyable): ...
+  c = C()
+  c2 = c.copy()  # type here should be C
+
+The same applies to class methods using ``Type[]`` in an annotation
+of the first argument::
+
+  T = TypeVar('T', bound='C')
+  class C:
+      @classmethod
+      def factory(cls: Type[T]) -> T:
+          # make a new instance of cls
+
+  class D(C): ...
+  d = D.factory()  # type here should be D
+
+Note that some type checkers may apply restrictions on this use, such as
+requiring an appropriate upper bound for the type variable used
+(see examples).
+
+
 Version and platform checking
 -----------------------------